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Revenue Standard : Approach to transition to the new standard

Posted on May 9th, 2017 by Sanjit Anand |Print This Post Print This Post |Email This Post Email This Post

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Question : Is there an approach to transition to the new accounting standard?

A: The standard states that the methods to transition to the new standards are as follows:

Entities are permitted to apply the new revenue standard either retrospectively subject to some practical expedients (that is, to restate prior periods for a consistent basis of accounting and presentation) or through an alternative transition method [full retrospective ].

The alternative transition method requires an entity to apply the proposed guidance only to contracts not completed at the date of initial application. Then, recognize the cumulative effect of adoption as an adjustment to the opening balance of retained earnings in the year of initial application. Under this approach, the financial statements before and after implementation will not be comparable.

Moreover , Retrospective transition requires applying the new guidance to all prior periods (subject to certain practical expedients).

From a timing standpoint, the critical issue is that an entity presenting three years of comprehensive income will likely need to run parallel systems for two years before the year of adoption

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